YES Bank, which is expected to come out of its reconstruction scheme on July 15, is in an “advanced stage” of sealing a joint venture deal with a global major to set up an asset reconstruction company (ARC) business in the country, its Managing Director and CEO Prashant Kumar has said.
This proposed ARC joint venture — for which YES Bank has finalised a list of potential partners — will not only take over the bank’s entire about ₹50,000 crore of Non-Performing Assets (NPAs) book, but will also undertake buyouts of stressed assets from other lenders in the country, Kumar told BusinessLine in an interview.
He, however, declined to divulge the name of the joint venture partner, stating that the bank would make the relevant disclosure to stock exchanges first once the deal is signed.
“We invited EOI from large global players. We have done a short list. It is not proper for me to share the name, as we have an obligation to tell the exchanges. This is a large deal, and for the bank, no such deal of this large magnitude has ever been done so far. This kind of experiment is a first for YES Bank, the banking industry, and even RBI. So YES Bank and the proposed JV partner are looking at all issues that may crop in the future before finalisation, “he said.
While Kumar declined to name the likely JV partner, the buzz in the market is that YES Bank may zero in on JC Flowers & Co, an American private equity firm.
Once the JV deal is firmed up, YES Bank will undertake a Swiss challenge and look for competing bids for its assets. If the bids are not higher, then a JV has to be formed and the entire NPA book has to be transferred to the joint venture ARC.
“YES Bank is committed to the JV route (where it will pick up a 20 per cent stake ) as we don’t have any other ARC in the country that have the large capital to buy the kind of assets that we are talking about.
There is strategic thinking to get the deal done this year. This is our effort to clean the balance sheet. If we don’t do this, handling the larger NPA pool will take years, “he added.
Business growth
Kumar also said that YES Bank this fiscal is eyeing overall loan growth of 15 per cent on current net advances of ₹1.8 lakh crore. This loan growth aim is “reasonable” and would largely come from the bank’s increased focus on the retail and MSME segments.
“With this loan growth, we are confident of not only doing well on the business side but also on profitability,” Kumar added. He expressed confidence that Yes Bank would this fiscal exceed the bottomline performance of ₹1,066 crore last fiscal.
In 2021-22, YES Bank recorded credit growth of 8 per cent while deposits grew by 21 per cent.
Kumar also said that he expects YES Bank to make NPA recoveries of ₹5,000 crore this fiscal. The last two fiscals, when the bank was under a restructuring scheme, the bank recovered ₹6,000 crore in each of these years.
It may be recalled that YES Bank went into a moratorium in March 2020. It had to be reconstructed while there was a nationwide lockdown due to the Covid-19 pandemic.
“The first year went to stabilising the bank and getting back the confidence of customers in the bank. We were able to raise a Follow-on Public Offering (FPO) of ₹15,000 crore. After stabilising the bank in 2020-21, the next financial year was more in terms of growth,” Kumar added.
Capital raising
Kumar said that YES Bank is now engaged in talks with “multiple players,” including private equity funds, for their coming on board as investors in the bank. The additional capital that Yes Bank is looking to raise this fiscal should be seen as a “capital buffer” to the existing comfortable capital position of a CET ratio of 11.5 per cent, he added.
“I am not confirming nor denying. I am only saying we are engaging with multiple players who are interested in putting money in the bank. We are not desperate to get capital. This is an advantage to us because we now enjoy sufficient capital. But definitely more capital is required for the bank”, Kumar added.
Kumar also said that new investor will be onboarded without violating the existing norm in the reconstruction scheme that stipulates SBI holding in Yes Bank to be at 26 per cent till March 2023.